Econintersect: The headlines are focused on China’s CPI (Consumer Price Index) increase of 2.6% year-over-year. Econintersect thinks the big story is with the PPI (Producer Price Index) which continued its y-o-y decline for the 18th consecutive month. Reports by others generally focus on the fact that the decrease for August was only 1.6% compared to July’s 2.3% decrease (and June’s -2.9%), with some commentary saying that the deflationary trend appeared to be weakening.
However, Econintersect suggests it is more important that the August value for the index was particlurly weak. It was suggested in the GEI News report last month that since the value of the PPI bottomed in August and September 2012 the opportunity would be for the PPI y-o-y deflation to end in August or September 2013. Starting in October 2012 PPI there were five months of increases. Things will be less favorable during those months for PPI to achieve positive y-o-y comparisons.
So the August opportunity for China’s deflating PPI to end has been missed. There is one more easy shot in September. After that there will be five months of trying to swim against the current until early 2014.
Sources:
- China’s Aug. PPI down 1.6 percent (Xinhuanet.com, 09 September 2013)
- China Inflation Stays Subdued as Producer-Price Drop Eases (Bloomberg News, 09 September 2013)
- Is China Trapped in Deflation? (GEI News, 09 August 20130
